The economic consequence of corporate philanthropic donations: evidence from Jordan

Abstract

PurposeThe purpose of this study is to investigate the impact of Corporate Philanthropic Donations (CPD) on the Corporate Economic Performance (CEP) of a group of Jordanian public shareholding companies.Design/methodology/approachThe sample includes 94 companies listed on the Amman Stock Exchange between 2010 and 2016. Manual content analysis is employed to collect the quantitative-related data needed for this study.FindingsOur findings show that CPD is relevant, with a significant impact on financial performance. More specifically, CPD has a positive impact on the performance indicators measured by Tobin’s Q (TQ), return on equity (ROE) and return on assets (ROA).Research limitations/implicationsThis study contributes to the research debate on CPD and CEP, especially in developing countries. It emphasizes the importance of such practices in increasing corporate profitability.Practical implicationsThe study’s findings highlight the importance of CPD for Jordanian corporate managers. A greater emphasis on donations is likely to attract investor attention, government attention, media attention and humanitarian activism, all of which will enhance corporate goodwill.Originality/valueThis study demonstrates the positive relationship between corporate social responsibility (CSR) and CEP in an emerging economy, with a focus on one aspect of CSR, namely donation, that is underrepresented in developing countries. The study employs multiple methods for analyzing profitability as proxied by TQ, ROE and ROA, given the presence of multiple proxies to measure profitability. A further interesting aspect is examining the topic of CPD in the Jordanian context, where listed companies exhibit a uniform understanding of CPD.